Summary:
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Some selling seen in the US dollar
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US housing data beats forecast
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Trump applies more pressure on the Fed
There’s been a little bit of softness seen in the buck today as traders look to position themselves ahead of the highly anticipated Fed rate decision tomorrow. The biggest gainers can be seen to come from the EM space while the only G10 currency experiencing sizable declines is the Norwegian Krone. Only 5 currencies are weaker than the greenback with 12 stronger.
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The USD is pulling back a bit on balance as the markets await the outcome of the forthcoming Fed rate decision. Source: xStation
On the data front there’s been some mildly upbeat news this afternoon with the release of the latest US housing data. Housing starts for November came in at a 1.26M, above the 1.23M expected and the prior reading of 1.22M. At the same time there was more good news from the sector as building permits also beat, with the reading of 1.33M comfortably above the 1.27M expected which was in line with the prior. This sector has seen some soft data in recent months and the latest readings will go some way to allay fears surrounding some weakness in housing. Due to the nature of mortgages the housing market is particularly sensitive to interest rates and with the Fed seen to hike for the 9th time in the current cycle tomorrow this data comes as a pleasant surprise.
The latest US housing data has shown a pleasing pick-up after recent releases hinted at weakness in the sector: XTB Macrobond
US president Trump has been an outspoken critic of the Fed as they’ve continued to hike rates. While it’s not entirely clear the 50 B’s he refers to here seems to be regarding the current pace of balance sheet reduction or Quantitative Tightening. Source: Twitter
Looking around USD pairs the USDCAD seems to be at a particularly interesting level ahead of this key event. The market has been well supported of late and today has moved back up near to its recent highs of 1.3445 - one of the few markets where the buck is gaining. Expectations for a dovish shift in the Fed are pretty high despite the likelihood of another 25 basis point increase and if this doesn’t materialise then there’s scope for some further USD appreciation.
USDCAD has gained in 10 of the past 12 weeks and the pair is now once more near the 1.3445 level. This has previously acted as a swing level and could be worth watching closely in the coming days. Source: xStation
